Investing 102

[GregWeld]

Today I took a look at some of the home builders... Which is a group I don't own and have never owned. I now know why! Wow what horrible charts. I thought perhaps now might be the time to look to see if there's some upside to them but AS USUAL I'm way late to that party. The smart money has already bid them up over the last couple years.

Lennar (LEN) has moved 200+% in the last TWO years! And now trades near its peak and pays a lousy half a percent dividend.

K B Homes (KBH) is one they talked about on CNBC this morning as having "not traded up with its peers" --- but it too is up this year 35% already and pays a stinky little dividend.

It's easy to look and say -- geez! They're going up big time and I'm losing out... and that MAY be true enough.. and yes... I think we're on the road to a housing recovery based on the bids for property my buddy just got on his 5 acres (6 bidders slugging it out!).

SO HERE'S MY TAKE: This is gambling... you're gambling that there is a SUSTAINED (2 to 5 years) housing turnaround.. and at this point if there is one LITTLE hiccup in the numbers - you're going to see these sell off big time... and the dividends aren't the kind that will make you comfortable waiting for 'em to come back. So while I might miss a nice double over the next couple years - I might also miss getting my azz handed to me.

Remember that in investing - you have CHOICES... and if you make a wrong choice -- you get a double negative for your effort. The double negative is that you loose on the bet - and since your bet is now tied up - something else is on the move up. So you lost and you lost the ability to catch the ride on the upside... that's a double negative in my book.

So here's my thought when choosing investments -- you look -- like at a pretty girl - it's okay to constantly be looking... but you don't need to risk your marriage going on a date. Yes - the upside is appealing - everyone loves to hit a big winner.... but the downside is just not worth "the risk". Europe hiccups - we hiccup - the tax law changes (vote OBAMA if you want to continue on a downward "entitlement" slide ala Europe) that might happen etc... and there's a lot of risk to a shaky recovery at this point. And since you don't get paid to wait - why bother.

[bdahlg68]

Greg - any thoughts on coal? They don't seem to have recovered well from 2008 yet. Also gambling, but thinking about picking some up some small positions in the likes of ACI or ARLP.

[GregWeld]

Originally Posted by bdahlg68

Greg - any thoughts on coal? They don't seem to have recovered well from 2008 yet. Also gambling, but thinking about picking some up some small positions in the likes of ACI or ARLP.

I don't know anything about coal - or commodities like that. I don't have investments in anything along those lines.

[preston]

Greg maybe you should invest in companies that run and maintain internet forum message boards. You're obviously a big believer in their products

[toy71camaro]

sure has been a crazy market...

on a good note tho.. I'm up 4% overall, with all my "Investing 102" strategy purchases i've made this year so far. Not bad i think!! Only 2 are "in the red" and one is only 1% in the red (CVX), other 6ish% (MCD), but that was bought before Investing 102 came along, when i was researching dividend investing on my own (starting to).



Although, technically, I'd want them ALL go to down for the next few years so i can build up more positions with the dividends they pay out.. but it is alot easier seeing your "picks" in the green vs the red. lol

[GregWeld]

Way to go Albert!

McDonalds will recover its former glory... and they're paying you to wait for it to do so... I was red in the name - after having huge gains in it - until this week when it went barely green... but I'm okay with the ups and downs of the market - those dividends are the true green!

The other day I was trying to show a buddy how to invest some new found money he's coming into... and I showed him a a "red" holding - it was down 4 or 5 grand... BUT then I showed him that they'd paid me 14 grand during the year. He got it!

I showed him that the gains nor losses are realized until you sell... and I don't plan to sell 98% of my holding any time soon.

On another note -- I have some (a years worth) bonds coming due between July and December.. so that money is "usually" rolled over into the next year out (in this case 2019 bonds) -- but my broker called and was trying to sell me on a couple and get this -- these were going to pay 2%!!! No growth in capital -- and 2% tax free.... until 2019! NO THANKS. I think he's fired. I can get 3% in McDonalds... and they'd have to be at the 30% income tax rate to get me down to 2% net...

[GregWeld]

Originally Posted by bdahlg68

Greg - any thoughts on coal? They don't seem to have recovered well from 2008 yet. Also gambling, but thinking about picking some up some small positions in the likes of ACI or ARLP.

Since you asked -- I looked into Coal... I now know why I'm not invested in that kind of energy...

Arch Coal (ACI) YTD - DOWN 52% - 1 year DOWN 73% - 5 year DOWN 89% - 10 year DOWN 39% And ----- drum roll --- the dividend is a whopping 1.74%

THEN I CHECKED OUT ALLIANCE RESOURCE PARTNERS (ARLP) -- now that's a stock a guy could invest in!

YTD - DOWN 19% - 1 year DOWN 21% - 5 year UP 33+% - 10 year UP 372%

And -- drum roll -- it pays a 7.31% dividend...

But since I don't know anything about that market - or why the Coal ETF (KOL) is so awful! Dreadful! BAD!.... I'd say I'm not looking to get into it. Just my own opinion. I just don't invest in stuff I don't know anything about.

[Vegas69]

What about Facebook?

[Bucketlist2012]

Originally Posted by Vegas69

What about Facebook?

Todd. I still think there is a lock on shareholders selling..I think it will drop when some people bail out.

It is still a no buy for me, but again, I only buy what I understand, and facebook doesn't seem like a good investment to me..More of a gamble , but not for me.

Hopefully others will chime in about faceBook.

[GregWeld]

Originally Posted by Vegas69

What about Facebook?

LOL.... Leave it to you to ask about FaceyBook...


My "problem" with Facebook is multi-pronged:


Eyeballs can bail on these types of "companies" faster than you can blink. And you don't find out info on that metric until you wake up one morning and the stock is down 20%

The company is run by a single person with little to no experience. Let's use the foot in mouth - stock avalanche - ala the idiot that runs NetFlix... BOOM! One stupid amateur statement and your money evaporates.

I've hammered and hammered over and over again the INVESTMENT vs gambling. With Facebook there is only one thing that a person can hang their hat on -- they HOPE it's going up from where they bought it. Period. They don't make money (profit) - they don't pay a dividend - the P/E is way out of whack... there just isn't anything a guy can say that states this is a good solid INVESTMENT. MySpace evaporated... 'cause Facebook won... what happens when something "new" comes along and bang... the only metric a guy was gambling on disappears?

To me - this is like CROCS (CROX)... they're faddish. IF - BIG IF - the company can move beyond and become mainstream you're golden... if not... you have a nice loss on your hands. They miss a quarter and you're down big. Crocs 52 weeks 'range' -- $14.20 to 32.47 -- I don't want to be the guy holding at 30ish and the stock is trading at 16.

The very fact that the IPO was a flop - and you have the lock up period yet to come off is another troubling factor. If the IPO ran 50% and climbed from there... then the lock up wouldn't bother me so much - because the rank and file might tend to only trim holdings while waiting for the price to climb. But now - if you were a holder - and you watched as the money slipped thru your fingers - would you tend to bail or hold? My guess is there's going to be plenty of new stock to come to market.

Let's use Microsoft as a prime example of how new stock to market affects the stock. The only thing that causes a stock to rise (or anything for that matter) is you have to have more people that want something than don't....Think houses - we went from everybody is buying one to nobody wants one and look at the result!

Paul Allen and Bill Gates dump NEW (Founders Stock) on the market monthly - in Bills case it's public knowledge - and he sells 200 to 500 HUNDRED MILLION PER MONTH... New never before been on the market shares... That just pounds the stock month after month... Now that it's been down for years - the grants that the employees got/get - they can't bail on 'em fast enough! So there's more shares "for sale". Thus you end up with a stock that's almost impossible to lift.

Once again = In investing you have OPTIONS... there are so many other GREAT investments out there that have growth rates of 100% over 5 or so years AND that pay income... That's where I put my money. They don't come with bragging rights.. but I smile all the way to the bank.